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Helping FHA Servicers Optimize Pre-Conveyance Asset Disposition

Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ: ASPS), a provider of real estate, mortgage and technology services, released a white paper entitled “New Opportunities for Servicers to Optimize CWCOT Disposition Strategies.” The white paper provides servicers with a road map for an effective and efficient Claims Without Conveyance of Title (CWCOT) program strategy.

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As the popularity of Federal Housing Administration (FHA) insured home loan lending expands, servicers are looking to refine their strategy for managing foreclosed homes under FHA’s CWCOT program. FHA developed the CWCOT program to help build stronger communities by preserving the condition and accelerating the sale of its real estate owned (REO) properties. To accomplish FHA’s objectives, the CWCOT program provides the servicer with two primary claim channels: sale at foreclosure auction (or shortly thereafter as a so-called “second chance” auction) and conveyance to the Department of Housing and Urban Development (HUD).

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As FHA loan volumes and delinquencies continue to increase (in 2016, FHA loans accounted for over 17 percent of newly originated mortgages yet they currently comprise 34.1 percent of all over-30-day delinquent loans, servicers will need more advanced strategies to optimize the disposition of CWCOT-eligible properties and achieve the CWCOT program’s goal of building stronger communities. This white paper provides servicers with a roadmap for an effective and efficient CWCOT program strategy — one that incorporates elements of decision theory and risk modeling to simplify and streamline processes while decreasing loss severity for servicers.

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Click here to download the white paper, “New Opportunities for Servicers to Optimize CWCOT Disposition Strategies.”

Altisource Portfolio Solutions S.A. (NASDAQ: ASPS) is an integrated service provider and marketplace for the real estate and mortgage industries. Combining operational excellence with a suite of innovative services and technologies, Altisource helps solve the demands of the ever-changing market.

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Altisource Launches Enhanced Vendor Oversight Platform

Altisource Portfolio Solutions has expanded its Vendorly platform. The platform launched last year exclusively for members of the Lenders One Cooperative, a national alliance of independent mortgage bankers, and is now available to the broader mortgage and community bankers market outside of the Lenders One network. The Vendorly platform is designed to help streamline vendor due diligence, document maintenance, monitoring and audits.

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The scrutiny of vendor oversight practices continues to be a focus of regulators. It’s important for mortgage and community bankers to have a multifaceted vendor oversight program. Through the Vendorly platform, and its vendor oversight offerings, Vendorly can help strengthen its customers’ compliance management framework and increase their operational efficiencies. Vendorly offers managed vendor oversight services, including due diligence, document management, annual assessments, information security assessments, financial condition reviews and on-site audits.

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Vendorly is announcing collaboration with Secure Insight, an innovator in the mortgage industry in providing settlement agent risk evaluation, rating, monitoring and database reporting on fully vetted mortgage closing professionals. Currently servicing close to 100 clients nationwide, Secure Insight will deliver real-time risk ratings and related settlement agent data to clients through the Vendorly platform. Together, Secure Insight and Vendorly intend to develop a platform that produces a transaction-based tool with risk data on each transaction prior to a closing (and just before the proceeds are wired). It is expected that this process will provide data in a more efficient, streamlined manner and give lenders greater comfort in the protection of their money, documents and consumer data at each closing.

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“Our relationship with Secure Insight allows us to leverage their deep expertise in settlement agent oversight and industry-leading database of over 50,000 vetted and rated agents, which has been a decade in the making,” said Jim Vaca, vice president, Vendorly. “With Vendorly, we’ve developed an easy-to-use platform for delivering stronger vendor management across all vendor types. Since our initial launch, we’ve provided our Vendorly solution to more than 50 customers, whose direct feedback helped shape the technology we are offering today.  Leveraging Altisource’s technology and industry expertise has enabled us to help bring efficiency to our clients’ vendor management processes.”

“We have always recognized that lenders are seeking a complete solution for vendor management, one that encompasses the different areas of risk and the various vendors that make up the universe of third parties with whom lenders conduct business,” said Andrew Liput, president and chief executive officer, Secure Insight. “We are excited to combine our specific expertise in settlement agent oversight with Vendorly’s oversight services, uniting our efforts to develop an integrated solution that will deliver our risk data on a transaction basis for greater loan efficiency and operational security at the closing table.”

Progress In Lending
The Place For Thought Leaders And Visionaries

Integration Streamlines The Title Process

Premium Title, a national provider of title and escrow services, has launched an integration with LendingQB’s end-to-end, browser-based loan origination system (LOS). The integration can help provide customers with the ability to obtain title and settlement quotes faster, place orders with Premium Title and receive a title fee certificate guaranteeing fees for 30 days, all without leaving the LendingQB platform.

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This integration, gives Premium Title clients the capability to experience a seamless and more efficient process within the LendingQB LOS platform. Lenders using LendingQB can receive an automated quote for title services and a title fee certificate guaranteeing title fees, which auto-populates into the LOS. LendingQB can also maintain the loan estimate and any adjustments in fees associated with the loan, assisting with TRID compliance and faster disclosure timelines.

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“Teaming up with LendingQB allows us to expand our network by providing customers with greater access to our exceptional title services and solutions,” said James A. Weld, president of Premium Title. “The positive feedback from our beta customers helps confirm that this integration is adding quality and efficiency to the loan origination process.”

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“We are pleased to offer Premium Title’s services through our loan origination system,” said Tim Nguyen, president of LendingQB. “This integration is a prime example of our best-of-breed strategy that will provide lenders with the ease of researching fees, ordering title services and receiving documents directly from Premium Title.”

Progress In Lending
The Place For Thought Leaders And Visionaries

Altisource Further Automates FHA Lending

Altisource Portfolio Solutions launched a specialized Federal Housing Authority (FHA) offering, taking advantage of its end-to-end product suite to assist in improving controls and mitigating risk throughout the lifecycle of servicing an FHA asset.

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FHA loans represent a growing share of many Servicers’ portfolios and require specialized processes to comply with complex servicing guidance. The Altisource FHA offering provides servicers the ability to help reduce timelines and increase efficiencies with transparency through a customizable approach. From integrated field services, title services and property repairs to Claims Without Conveyance of Title (CWCOT) Auction Services, the complete suite of products is backed by the power of proprietary data and analytics to help further reduce risk and cost for Servicers.

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In 2016, Altisource continued to grow its Servicer Solutions product suite, increasing its offerings to existing clients and significantly expanding its client base. “We are extremely committed to offering our customers access to customized mortgage and real estate solutions that help drive results,” said John A. Vella, chief revenue officer at Altisource. “We have developed our solutions by leveraging company-wide capabilities combined with our extensive industry experience, compliance and control environment, innovative technology and data analytics to deliver inventive approaches which help mitigate risk in an ever-changing regulatory environment.”

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Altisource Portfolio Solutions S.A. is a provider of solutions for the real estate, mortgage and consumer debt industries. Altisource’s proprietary business processes, vendor and electronic payment management software and behavioral science-based analytics are designed to improve outcomes for marketplace participants.

Progress In Lending
The Place For Thought Leaders And Visionaries

Revolutionizing The LOS

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Mortgage builder has been serving the mortgage industry for almost 20 years. The company touts that it has the highest customer retention rate in the industry due to exceptional service and support — Mortgage Builder’s first customer is still a customer over 15 years later. In September 2014, the Mortgage Builder business was acquired by Altisource Portfolio Solutions S.A. Altisource is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. The company has big plans for Mortgage Builder. Larry Alston, the General Manager of Mortgage Builder, talked to our editor about his background and the future of the LOS space. Here’s what he said:

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Q: Larry, you came from the big data industry. What were your first observations of the mortgage industry?

LARRY ALSTON: My first observation was that it is an industry begging to be automated and renovated. What jumped out at me the most was how underserved the mortgage industry is by technology vendors. A lot of lenders continue to do things the way they have always been done — even if it’s in a manner that is less efficient and/or manual, which is often inconvenient for potential borrowers.

Right now, there is an amazing opportunity for technology vendors that are willing to look at the industry from a different perspective and innovate to deliver a much better borrower experience.

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What gets me up in the morning and excited about Mortgage Builder is that outside forces, for the first time in a long time in the mortgage industry, are going to drive innovation. These outside forces are the millennials that are hitting the marketplace with an expectation that people should be able to obtain a mortgage completely online, or at least in self-service mode, with the same type of customer experience they would have if they were shopping for clothes or buying a car online.

Consumer expectations, coupled with the regulatory environment, are increasing the competitive forces entering the marketplace. Additional examples of outside forces include advertisements talking about digital mortgages and quick mortgages.

Q: How has your knowledge and expertise from the big data industry benefited Mortgage Builder?

LARRY ALSTON: The influences I spoke about are driving lenders to look at new technology and will be based on things such as big data, consumer analytics, analytical reporting and the ability to scale.

We believe the industry will ultimately favor vendors who have the ability to scale — to work with their partners, to go out and audit partners, to deal with much higher loan volume and to properly handle the cost of regulatory compliance.

Technology will be hosted in the cloud, centered on data and providing accessibility to it. The data will not only help lenders drive business but also provide insight into how they can improve business. These are the key things that we are working on and plan to bring to the market over the next few years.

So, why does a “techie guy” from the big data business come to run Mortgage Builder? It is because I feel there is a huge opportunity to take what is happening in other industries and apply them to improving the mortgage process. Those improvements will provide our customers with a tremendous competitive advantage over time.

Q: Where can the mortgage industry benefit from change the most?

LARRY ALSTON: The biggest benefit that lenders can receive from the changes mentioned is the ability to close more loans at a higher quality using fewer resources while delivering an enhanced user experience.

We always talk about the lender wanting to close more loans with fewer full-time employees (FTEs) because everyone equates FTEs with cost. So, it is really about how a lender reduces costs. The ultimate goal of all of the changes that we are talking about, including putting data in the cloud, is to make a lending business more efficient. This efficiency will include making data more accessible to end users, closing more loans at a higher quality while adhering to regulatory compliance — and doing it at lower cost in a predictable manner.

Q: What should lenders look for when switching to new loan origination software?

LARRY ALSTON: Today’s ever-changing mortgage market demands more from lenders and their staff. There are more rules and regulations, increased pressure to produce results with fewer resources and intense competition for prospective borrowers. There is more urgency to increase profitability while mitigating risk. Today’s online borrower simply demands more, which is why selecting the right Loan Origination Software (LOS) provider is about so much more than just technology.

For many, an LOS is nearly a commodity, but there is significant churn in the market. Transitioning to a new LOS is time-consuming and disruptive, so why do they do it? Lenders do not switch LOSs for a shiny new button or a sexy new user interface. They switch because their LOS vendor has let them down.

Yes, the platform has to meet configuration, end-to-end and scalability needs, but most LOS options do. The real question when selecting a new LOS is whether the vendor is the right partner for your business. Here are six areas to consider if you are partnering with the right LOS vendor. Here’s what they should demand from their LOS:

1) Customer Service

Having the best technology doesn’t matter much if customers are not fully supported or if the vendor doesn’t have the expertise to meet the ever-changing lending requirements.

The right LOS provider understands the importance of a strong partnership. It’s about developing relationships and fully understanding a customer’s business model to consistently provide the ongoing support and service needed to achieve goals. It’s about maximizing resources and your customer’s expertise. It’s about driving productivity through a partnership that allows you to demand more.

Some questions you should consider about your vendor include: If you have an issue that is preventing a customer from closing loans, how quickly will it be addressed? Will the customer be stuck in a never-ending phone system call queue or will they be getting answers from a live person that is fully vested in their success? Customer service is so much more than just a phone number and a ticketing system. The right partner goes above and beyond to deliver more to ensure customers are continuously satisfied.

2) Mortgage Expertise

Technology is important, but how technology is used is more important. Giving customers software and pushing them out the door is fraught with danger. How will customers improve upon their existing business efficiency? Even if they are happily deployed, what happens when they grow or diversify?

Customers need a team of experts who will support them through the transition. It doesn’t matter if you have great technology if it isn’t successfully implemented. It should start with a unique discovery and needs assessment process as well as proven implementation programs, and it should carry through everything the vendor does to support your needs.

Supporting customer needs includes live support, work groups, development of super users, knowledge transfer and annual tune-ups to ensure the sustained success of customers. Partnerships with providers should evolve with you and your lending needs to provide a superior user experience.

The provider must demonstrate extensive industry experience, take the time to listen to the customer’s needs and learn how it does business by applying best practices and designing workflows to make the business more efficient. Providers need to be there from day one and throughout the contract to advise customers on how to improve efficiency so they can close more loans with fewer FTEs.

3) Compliance

It is critical to partner with a provider that has the resources, expertise and depth of understanding to constantly monitor, update and offer expert advice on changing rules and regulations. Some questions to ask yourself about your current provider are: How well did they support you during the TRID changes? Did they proactively offer insight and guidance about how to properly implement the required changes or were you left scrambling to meet deadlines? Are you still struggling to properly respond to TRID? Are potential penalties and fines looming? If TRID was any indication of how they handle regulatory changes, are you set up properly for the next regulator change?

You need an LOS partner that employs compliance leaders that truly understand how the regulatory changes will impact business and proactively work with your teams to deliver solutions well ahead of regulatory deadlines.

4) Growth

If you plan on growing your business as a lender — whether through new lending channels, M&A or other growth-related initiatives — the right provider needs to be there every step of the way. Partners must demonstrate an unwavering dedication to constantly enhancing their products, support and services to allow you to face these ever-changing market conditions with confidence. Providers need to be committed to developing solutions that keep the industry and your business moving forward.

5) Product Direction

Think about your current provider and answer these questions: Is your current provider dictating future product direction that you are forced to accept or do you have a say in what you need the solution to deliver? Do you truly have a voice? Future product direction should be done in a highly collaborative manner that allows you to provide key insight and input to a group of talented mortgage experts that are passionate about working with you to deliver solutions that propel your business forward.

6) Company Viability

The influx of new rules and regulations has severely taxed many LOS providers. Ask yourself: Does your current provider have the proper resources, financial backing and ability to deliver solutions going forward?

Many LOS providers with limited resources were barely able to meet regulatory requirements let alone deliver new and innovative solutions to meet the demands of today’s borrower. A provider’s long-term viability is a key requirement when selecting a new vendor. The right partner delivers more than just advanced technology.

Q: What do lenders have to focus on if they want to deliver innovation to potential borrowers?

LARRY ALSTON: Technology can’t do it by itself. Things are changing and lenders can’t keep doing things the same way just because it’s how it has always been done. Lenders are going to have to adapt to the technological changes that are occurring if they want to be able to deliver innovative products and services to borrowers.

Software alone can’t do that for lenders. For instance, when a lender implements a new LOS, it is an opportunity for that lender to rethink and change its business operations. If all a lender is doing is taking its current processes and automating them, it is missing an opportunity to improve. There is no value in automating a broken or inefficient process.

Lenders have to rethink their processes when they adopt new technologies. It is an opportunity, not a burden.

We are going to see national-scale lenders become much more aggressive in the marketplace. What people must realize is that these lenders are going to be able to offer more sophisticated products in a low-touch manner. That competitive pressure is going to become tangible — and the need to reinvent and retool is going to become more and more pressing.

Q: Where do you see the industry going in the next two to five years?

LARRY ALSTON: There is going to be increased consolidation in the industry over the next couple of years. There will be fewer lenders and much of that reduction will be driven by the increased competition from the lenders that have successfully scaled. In addition, the industry will experience continued regulatory pressures, which, during TRID, clearly favored those lenders that could scale and properly meet regulatory burdens. Without the right technology partners, it is going to be very difficult for lenders to remain competitive.

INSIDER PROFILE

Larry Alston is the General Manager of Mortgage Builder, which is an Altisource business unit. In his role, he is responsible for all aspects of the Mortgage Builder business and strategic direction. He has a track record of success in enterprise B2B software, most recently in his position as president of FuseSource Corporation, an open source integration and messaging company (acquired by Red Hat in September 2012). Before FuseSource, Alston held senior management positions at EnterpriseDB, IONA Technologies, and eXcelon Corporation.

INDUSTRY PREDICTIONS

Larry Alston thinks:

1) I expect to see a continued influx of new rules and regulations.

2) Borrowers will continue to demand easier user interfaces.

3) Self-service will continue to play a growing role in mortgage technology.

Mortgage Builder can be found online HERE.

Progress In Lending
The Place For Thought Leaders And Visionaries

LendersOne Endorses Optimal Blue

The Lenders One Mortgage Cooperative, a national alliance of community mortgage bankers, correspondent lenders and suppliers of mortgage products and services, recently announced the selection of Optimal Blue as a new preferred vendor. Optimal Blue, a cloud-based provider of enterprise lending solutions to the mortgage industry, provides mortgage banks, community banks and credit unions the ability to navigate the complex mortgage process from capital markets, to consumers, and back.

“Lenders One is focused on delivering opportunities for our members to be innovative in the communities they originate in and with the borrowers they serve. Optimal Blue fulfills that with its highly-regarded suite of technology offerings that’s been proven to simplify the origination process for borrowers and help attract more customers,” said Jeff McGuiness, CEO of Lenders One.

Optimal Blue offers a suite of innovative services that help mortgage banks, credit unions and community banks improve efficiencies, manage compliance, reach consumers and boost secondary market performance. Consumers are looking for a new approach to the lending process according to recent study from PwC’s Experience Radar research group, which found that more than one-fourth of consumers (28%) are looking for a purely online mortgage experience. Meeting that demand is the cloud-based eOriginations platform that extends the simplification of mortgage originations to consumers through an online mortgage application experience, providing transparency and greatly reducing the time and effort required from prospective borrowers.

“Optimal Blue’s innovative technology greatly improves a lender’s ability to originate compliant mortgages efficiently, and to engage consumers who are increasingly interested in applying for mortgages online,” said Larry Huff, Co-CEO of Optimal Blue. “We look forward to working with Lenders One to help its members become more efficient, competitive, profitable, and equipped for success in today’s evolving mortgage origination market.”

Progress In Lending
The Place For Thought Leaders And Visionaries

Reaching Out To Brokers And Other TPOs

Altisource Portfolio Solutions S.A. has launched Wholesale One, a new cooperative for the wholesale mortgage industry. The organization will provide a platform for mortgage brokers, wholesale lenders and related vendors to provide quality loans to consumers nationwide. Here’s how it will work:

The new cooperative will assist mortgage brokers and other third-party originators with tools to improve their businesses. Cooperative benefits are designed to help lower costs for third-party services and streamline the financial execution of a wide variety of loan products.

“The cooperative model is a proven structure for supporting efficient business practices, consistently helping deliver compliant solutions and bringing best practices to the forefront of the industry,” commented Joseph Davila, President of Altisource Mortgage Services. “Our unique ability to connect buyers with services along with our expertise in process solutions lend themselves well to the cooperative environment. The launch of Wholesale One is an exciting new way for Altisource to further develop our mortgage marketplace.”

Altisource has tapped mortgage industry veteran, Greg Murray, to lead the new cooperative as Chief Executive Officer. Wholesale One will benefit from Murray’s extensive background in the third-party originations space and decades of leadership experience at Citigroup, Wells Fargo and JPMorgan Chase & Co.

“This $100 billion market is facing a variety of funding, compliance and operational challenges, so the timing is ideal to step in and deliver a crisp, streamlined execution platform to help ensure product diversity remains available for today’s home buyers while enabling compliant growth for the mortgage broker community,” commented Murray.  “The proprietary technology and originations expertise at Altisource, combined with the collective buying power inherent in a cooperative, means there is truly an opportunity to help third-party originators navigate an evolving market while helping to alleviate business process and compliance challenges.”

Altisource acquired mortgage cooperative Lenders One, servicing technology provider Equator and LOS Mortgage Builder. So, this combined portfolio coupled with their prior internal resources, makes this expansion a next logical step for the company. Personally, I expect to see the company make more similar moves as time goes by.

About The Author

[author_bio]

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Servicing Vendor Expands Its Compliance Footprint

Everyone has their eye on compliance these days. For example, mortgage servicing software provider Equator has enhanced its product suite with its new Loan Management module to assist mortgage loan servicers with compliance and transparency across their businesses and technologies.

The new Loan Management module strengthens a mortgage servicer’s existing technology, making it easier to administer rules, assign loans, reconcile portfolios and take snapshots of decisions. The module simplifies compliance for mortgage servicers by creating detailed audit trails and compliance checks that are documented, stored and easily accessible for review. It can be used throughout the entire lifecycle of default from delinquency through liquidation.

“Our new Loan Management module makes it easier and faster for mortgage servicers to comply with the changing regulatory environment by providing a transparent, flexible process which is based on our deep industry experience developed over the last ten years,” said John Vella, Chief Operating Officer of Equator­, an Altisource business. “We are excited to have a customizable solution that can span the servicing spectrum and integrate with all the existing servicing systems.”

Equator supports a wide range of servicers, asset managers, real estate agents and vendors in the mortgage industry with over 40% of all distressed real estate processed through its platform. The Loan Management module is the latest product delivered by Equator, expanding Equator’s end-to-end platform including Loan Modification, Short Sale, Deed in Lieu, Foreclosure, Bankruptcy and REO modules.

About The Author

[author_bio]

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Moody’s Downgrades Ocwen Loan Servicing

Moody’s Investors Service has downgraded Ocwen Loan Servicing, LLC’s servicer quality (SQ) assessments as a primary servicer of subprime residential mortgage loans to SQ3+ from SQ2- and as a special servicer of residential mortgage loans to SQ3+ from SQ2-. Both assessments remain on review for further downgrade. The ratings agency also lowered the company’s component assessment for loan administration to average from above average.

Moody’s SQ assessments represent its view of a servicer’s ability to prevent or mitigate asset pool losses across changing markets. Moody’s servicer assessments are differentiated in the marketplace by focusing on performance management. The assessment scale ranges from SQ1 (strong) to SQ5 (weak).

In Moody’s last SQ assessment of Ocwen, on 21 August 2013, Moody’s maintained the company’s SQ2- assessment as a primary servicer of subprime loans and its SQ2- assessment as a special servicer of residential mortgage loans. Both SQ assessments remained on review for downgrade owing to concerns about Ocwen’s rapid portfolio growth and the challenges of integrating the acquired servicing platforms and managing the additional distressed loan portfolios.

The assessment action reflects the heightened regulatory scrutiny of Ocwen Financial Corp. by the US Securities and Exchange Commission (SEC) and the New York Department of Services (NYDFS). Based on their findings, these agencies could restrict Ocwen’s activities, levy monetary fines, or take additional actions that could negatively affect the company’s financial strength and servicing stability.

The assessment action follows Ocwen Financial Corp’s announcement on 18 August 2014 that it had received a subpoena from the SEC in June seeking documents related to its business dealings with corporate affiliates and a probe related to the interests of the executives in the companies. The NYDFS on 4 August 2014 also issued a letter to Ocwen that raises concerns about potential conflicts of interest and potentially inconsistent statements and representations regarding corporate governance.

Moody’s also lowered the company’s component assessment for loan administration to average from above average based on regulatory concerns regarding force-placed insurance fees and the role of Altisource Portfolio Solutions, S.A. in the planned implementation of Ocwen’s new force-placed insurance program. Ocwen also has embarked on an initiative to review all loan-related imaged documents to identify duplicate documents, index documents that are not appropriately classified and reimage documents, which are not legible. Ocwen expects the effort, which should improve the quality of servicing, to be completed in approximately one year.

The review for downgrade for the special servicer and the subprime servicer assessments reflects Moody’s continuing concerns about Ocwen’s challenges integrating the acquired servicing platforms and managing the distressed loan portfolios. It also reflects uncertainty regarding the impact of the regulatory scrutiny and possible regulatory actions on the company’s servicing stability.

About The Author

[author_bio]

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

LOS Leaders Are Emerging

You Can Download This Full Article As A PDF HERE

TME-TGarritanoI always used to wonder how the mortgage space could support 50, 60 different loan origination system (LOS) providers. I guess when you operate in a loosely regulated space with lots of investors, lots of volume and lots of mortgage bankers and brokers, there’s enough to go around for all of these LOS companies to survive. Today all of those conditions have disappeared so we’re seeing a lot of shifts in the LOS space.

So, who are the leaders in the midtier LOS space? A slew of recent acquisitions has brought three LOS companies to the front of the line in my view. The LOS in first place has to be Ellie Mae. In a move to bolster its content and services offering, Ellie Mae signed a definitive agreement to acquire AllRegs, an information provider for the mortgage industry.

AllRegs information management solutions are used by more than 3,000 companies representing every facet of mortgage banking: major lenders and investors, regulators, Federal and State agencies, brokers, mortgage services vendors and law firms. AllRegs product offerings include education and training, loan product and guideline data and analytics, and the AllRegs online reference library that includes investor underwriting and insuring guidelines, federal and state statutes and regulations, Mortgage Mentor “how to” guides and plain language interpretation and analysis.

“AllRegs has built a strong reputation as the industry’s source for investor guidelines, compliance resources and education,” said Sig Anderman, chief executive officer of Ellie Mae. “With the acquisition of AllRegs, Ellie Mae will expand its customer base and add a broad array of content and services that complement our portfolio of product offerings. This strategic acquisition enhances Ellie Mae’s compliance leadership and furthers our goal to be the company that powers the entire mortgage industry.”

AllRegs extensive content library spans nearly every aspect of the mortgage industry. Relied upon by virtually all of the top 100 lenders in the country, AllRegs is the exclusive electronic publisher of underwriting and loan product guidelines for Fannie Mae, Freddie Mac, Wells Fargo Home Mortgage, Citigroup, JPMorgan Chase, the Federal Home Loan Bank of Chicago, U.S. Bank Home Mortgage and Flagstar Bank, N.A.

The transaction is expected to close within 90 days and is subject to customary closing conditions. Under the terms of the agreement, Ellie Mae will acquire AllRegs for $30.0 million in cash, subject to certain purchase price adjustments, including for working capital.

So, who can challenge Ellie Mae? The Altisource acquisition of Mortgage Builder puts them in strong contention. However, several times in the past we’ve seen good midtier technology companies that offer quality service and have a decent market share get acquired by larger companies. What happens next? The midtier company loses its identity and struggles in most cases. Is this what’s in store for Mortgage Builder now that they have been acquired by Altisource?

I don’t think so. The Altisource acquisition of Mortgage Builder has the beginnings of a great success story. For Altisource, they are getting more involved in the mortgage space. They want to have an end-to-end LOS. They want to control the entire mortgage lifecycle. That’s a good thing for Mortgage Builder because they will be the only LOS in the Altisource portfolio and Altisource doesn’t know much about the LOS, so Keven M. Smith, Chief Executive Officer of Mortgage Builder, will remain a big player. He’s not looking for an exit strategy.

“I built the company from the ground up,” he said. “Being privately held has been great, but some of the acquisitions that we want to do and the extensions to our product require that a bigger company be behind us. There are also offerings within Altisource like Lenders One, for example, that we look forward to being more involved with.

“This is not a cash-out deal, this is the next step in the lifecycle of Mortgage Builder,” Smith continued. “All of the staff are being brought over. As time goes on we are looking to expand. We will add more staff and look to get more entrenched in Altisource offerings. Altisource doesn’t have an LOS so the fact that we would be here long term running the company was a selling point for them.”

In fact, if you look the Equator acquisition, Altisource has a clear track record established. The Equator staff and corporate identity remains in tact. The company was acquired for its expertise in loss mitigation and its involvement with Altisource has enabled the Equator staff to grow their business.

“It’s harder to grow as a privately held LOS,” noted Smith. “We at Mortgage Builder are looking to be a larger company and grow. I don’t have a rich uncle to go to and get money from to do the acquisitions that we want to do. We want to be the premier LOS player.”

Mortgage Builder recently acquired a PPE/CRM provider and a servicing software provider. Now that the company has Altisource behind it more acquisitions will undoubtedly follow. Mortgage Builder will also be able to accelerate plans to improve its existing technology to prepare lenders for what comes next in the world of mortgage lending. All indications are that the acquisition was a good fit for a larger company looking to offer a complete lending technology solution and a solid midtier LOS looking to grow.

Lastly, PCLender, LLC has acquired the PCLender loan origination system back from Black Knight Financial Services and formed a new company that will focus on providing turnkey mortgage technology solutions for midsized mortgage bankers. No sale price was disclosed.

PCLender, LLC has been heavily capitalized to expand the system functionality and implement automation solutions for lenders requiring increased compliance and workflow efficiencies. The system currently supports banks and credit unions with consumer point-of-sale, loan processing, automated underwriting, loan closing, integrated imaging, secondary marketing, trade management, warehouse management and interim servicing. PCLender’s retail and wholesale platform will now be expanded to support correspondent lending and include automated loan audit and post-closing review support. Additionally, an emphasis will be made to refine vendor integrations and build out fulfillment services that streamline lender operations.

Lionel Urban, president and CEO of PCLender, LLC said the management team will initially focus on strengthening customer relationships and pursue customer collaboration to speed the pace of design enhancements. “I believe the PCLender customer base has some very valuable feedback and we intend to implement that into our development road map. I think that was a strength of the organization early on and we are excited to reengage with the customer base in a collaborative manner.”

PCLender, LLC will continue to build on the scalable architecture and security that is currently inherent in the system. PCLender, LLC anticipates the development and support resources dedicated to the LOS will increase by over 60 percent in the next 12 months to support the new growth initiatives.

PCLender, LLC will focus on workflow and configuration defaults that will enable lenders to implement the LOS within 30 days using industry best practices. Mr. Urban believes that the small to midsized mortgage lenders are an underserved market and plans to offer a more robust solution that will require less administrative support by the lenders.

All three of these companies have emerged as LOS leaders that will be around for the long haul.

About The Author

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Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.